Solaris Corporation prepared the following estimates for the four quarters of the current year: Sales Accounts Cost of goods sold Administrative costs Advertising costs Executive bonuses Provision for bad debts Annual maintenance costs Additional Information • • • • First Quarter Second Quarter Third Quarter Fourth Quarter $ 1,275,000 $ 1,530,000 $ 1,785,000 $ 2,040,000 434,000 514,000 500,000 280,000 584,000 285,000 634,000 295,000 0 140,000 0 0 0 0 104,000 0 0 0 78,000 0 0 60,000 0 First-quarter administrative costs include the $180,000 annual insurance premium. Advertising costs paid in the second quarter relate to television advertisements that will be broadcast throughout the entire year. No special items affect income during the year. The company estimates an effective income tax rate for the year of 25 percent. Required: a. Assuming that actual results do not vary from the estimates provided, determine the amount of net income to be reported each quarter of the current year. b. Assume that actual results do not vary from the estimates provided except for that in the third quarter, the estimated annual effective income tax rate is revised downward to 22 percent. Determine the amount of net income to be reported each quarter of the current year. Period Net Income a. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter b. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Solaris Corporation prepared the following estimates for the four quarters of the current year: Sales Accounts Cost of goods sold Administrative costs Advertising costs Executive bonuses Provision for bad debts Annual maintenance costs Additional Information • • • • First Quarter Second Quarter Third Quarter Fourth Quarter $ 1,275,000 $ 1,530,000 $ 1,785,000 $ 2,040,000 434,000 514,000 500,000 280,000 584,000 285,000 634,000 295,000 0 140,000 0 0 0 0 104,000 0 0 0 78,000 0 0 60,000 0 First-quarter administrative costs include the $180,000 annual insurance premium. Advertising costs paid in the second quarter relate to television advertisements that will be broadcast throughout the entire year. No special items affect income during the year. The company estimates an effective income tax rate for the year of 25 percent. Required: a. Assuming that actual results do not vary from the estimates provided, determine the amount of net income to be reported each quarter of the current year. b. Assume that actual results do not vary from the estimates provided except for that in the third quarter, the estimated annual effective income tax rate is revised downward to 22 percent. Determine the amount of net income to be reported each quarter of the current year. Period Net Income a. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter b. 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Solaris Corporation prepared the following estimates for the four quarters of the current year:
Sales
Accounts
Cost of goods sold
Administrative costs
Advertising costs
Executive bonuses
Provision for bad debts
Annual maintenance costs
Additional Information
•
•
•
•
First Quarter Second Quarter Third Quarter Fourth Quarter
$ 1,275,000 $ 1,530,000 $ 1,785,000 $ 2,040,000
434,000
514,000
500,000
280,000
584,000
285,000
634,000
295,000
0
140,000
0
0
0
0
104,000
0
0
0
78,000
0
0
60,000
0
First-quarter administrative costs include the $180,000 annual insurance premium.
Advertising costs paid in the second quarter relate to television advertisements that will be broadcast throughout the entire year.
No special items affect income during the year.
The company estimates an effective income tax rate for the year of 25 percent.
Required:
a. Assuming that actual results do not vary from the estimates provided, determine the amount of net income to be reported each
quarter of the current year.
b. Assume that actual results do not vary from the estimates provided except for that in the third quarter, the estimated annual
effective income tax rate is revised downward to 22 percent. Determine the amount of net income to be reported each quarter of
the current year.
Period
Net Income
a. 1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
b. 1st Quarter
2nd Quarter
3rd Quarter
4th Quarter
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